SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............. to ...................
Commission file number 0-18110
GEHL COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0300430
(State or other jurisdiction of incorporation (I.R.S.Employer
or organization) Identification No.)
143 Water Street, West Bend, WI 53095
(Address of principal executive office) (zip code)
(414) 334-9461
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 28, 1997
Common Stock, $.10 Par Value 6,196,898
GEHL COMPANY
FORM 10-Q
June 28, 1997
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income for the
Three- and Six-Month Periods Ended June 28, 1997
and June 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at June 28, 1997,
December 31, 1996, and June 29, 1996 . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Six-Month Periods Ended June 28, 1997 and
June 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . 6
Management's Discussion and Analysis of Results of Operations
and Financial Condition . . . . . . . . . . . . . . . . . . . . 8
PART II. - OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART I - FINANCIAL INFORMATION
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
NET SALES $ 51,592 $ 44,474 $ 95,267 $ 83,639
Cost of goods sold 36,045 31,122 66,737 59,271
-------- -------- -------- --------
GROSS PROFIT 15,547 13,352 28,530 24,368
Selling, general and
administrative expenses 8,951 8,608 17,783 16,641
-------- -------- -------- --------
INCOME FROM OPERATIONS 6,596 4,744 10,747 7,727
Interest expense (459) (1,056) (927) (2,097)
Interest income 339 399 661 808
Other expense, net (406) (409) (459) (461)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 6,070 3,678 10,022 5,977
Income tax provision 2,185 745 3,608 1,148
-------- -------- -------- --------
NET INCOME $ 3,885 $ 2,933 $ 6,414 $ 4,829
========= ======== ========= ========
EARNINGS PER SHARE $ .60 $ .47 $ 1.00 $ .78
The accompanying notes are an integral part of the financial statements.
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 28, December 31, June 29,
1997 1996 1996
ASSETS (Unaudited) (Unaudited)
Cash $ 6,576 $ 4,208 $ 5,255
Accounts receivable-net 64,317 55,141 70,891
Finance contracts receivable-net 6,918 5,098 7,842
Inventories 17,579 18,642 18,791
Deferred tax asset 4,385 5,035 4,397
Prepaid expenses and other assets 1,391 1,624 1,347
---------- ---------- ----------
Total Current Assets 101,166 89,748 108,523
---------- ---------- ----------
Property, plant and equipment-net 23,521 21,678 20,620
Finance contracts receivable-net,
non-current 4,101 3,063 4,604
Other assets 5,424 5,636 5,415
---------- ---------- ---------
TOTAL ASSETS $ 134,212 $ 120,125 $ 139,162
========== ========== =========
LIABILITIES AND SHAREHOLDERS'EQUITY
Current portion of long-term debt
obligations $ 186 $ 178 $ 191
Accounts payable 18,917 14,384 13,192
Accrued liabilities 19,781 17,574 17,865
---------- --------- ---------
Total Current Liabilities 38,884 32,136 31,248
---------- --------- ---------
Line of credit facility 11,344 10,454 36,102
Long-term debt obligations 8,645 8,740 8,832
Other long-term liabilities 1,678 1,594 1,574
Deferred income taxes 2,369 2,369 1,425
---------- --------- ---------
Total Long-Term Liabilities 24,036 23,157 47,933
---------- --------- ---------
Common stock, $.10 par value,
25,000,000 shares authorized,
6,196,898, 6,158,720 and
6,143,289 shares outstanding,
respectively 620 616 614
Preferred stock, $.10 par value,
2,000,000 shares authorized,
250,000 shares designated as
Series A Preferred Stock,
no shares issued - - -
Capital in excess of par 26,197 26,155 26,061
Retained earnings 44,475 38,061 33,306
---------- --------- ---------
Total Shareholders' Equity 71,292 64,832 59,981
---------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 134,212 $ 120,125 $ 139,162
========== ========= =========
The accompanying notes are an integral part of the financial statements.
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Six Months Ended
June 28, June 29,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 6,414 $ 4,829
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,418 1,346
Increase in finance contracts receivable (19,033) (20,038)
Proceeds from sales of finance contracts 15,913 14,651
Cost of sales of finance contracts 482 408
Net changes in remaining working capital
items (810) 3,679
------- -------
Net cash provided by operating activities 4,384 4,875
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (3,182) (1,579)
Other assets 233 670
------- -------
Net cash (used for) investing activities (2,949) (909)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in long-term debt
obligations (87) 8
Increase in long-term liabilities 84 288
Proceeds from (repayments of) credit facility 890 (1,746)
Treasury stock repurchase - (535)
Proceeds from issuance of common stock 239 8
Purchase of warrant (193) -
------- -------
Net cash provided by (used for)
financing activities 933 (1,977)
------- -------
Net increase in cash 2,368 1,989
Cash, beginning of period 4,208 3,266
------- -------
Cash, end of period $ 6,576 $ 5,255
======= =======
Supplemental disclosure of cash flow
information:
Cash paid for the following:
Interest $ 898 $ 2,081
Income taxes $ 2,251 $ 1,122
The accompanying notes are an integral part of the financial statements.
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the
information presented not misleading.
In the opinion of management, the information furnished for the three-
and six-month periods ended June 28, 1997 and June 29, 1996 includes all
adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of the results of operations and financial position of
the Company. The results of operations for the six months ended June 28,
1997 are not necessarily indicative of the results to be expected for the
entire year.
It is suggested that these interim financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
as filed with the Securities and Exchange Commission. Certain
reclassifications have been made in the prior year condensed consolidated
financial statements to conform with the current year presentation.
NOTE 2 - EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted average number of shares of common stock and, if applicable,
common stock equivalents which would arise from the exercise of stock
options and warrants. The weighted average number of shares used in the
computations was 6,479,316 and 6,228,153 for the three months ended June
28, 1997 and June 29, 1996, respectively, and 6,441,828 and 6,215,599 for
the six months ended June 28, 1997 and June 29, 1996, respectively.
NOTE 3 - INCOME TAXES
The income tax provision is determined by applying an estimated
annual effective income tax rate to income before income taxes. The
estimated annual effective income tax rate is based on the most recent
annualized forecast of pretax income, permanent book/tax differences, and
tax credits.
NOTE 4 - INVENTORIES
If all of the Company's inventories had been valued on a current
cost basis, which approximated FIFO value, estimated inventories by major
classification would have been as follows (in thousands):
June 28, December 31, June 29,
1997 1996 1996
Raw materials and
supplies $ 4,151 $ 3,547 $ 3,713
Work-in-process 10,146 9,120 7,907
Finished machines and parts 22,077 24,770 26,044
------- ------- -------
Total current cost value 36,374 37,437 37,664
Adjustments to LIFO basis (18,795) (18,795) (18,873)
------- ------- -------
$ 17,579 $ 18,642 $ 18,791
======= ======= =======
NOTE 5 - SHAREHOLDER RIGHTS PLAN
On May 28, 1997, the Board of Directors of the Company adopted a
Shareholder Rights Plan and declared a rights dividend of one preferred
share purchase right (Right) for each share of common stock outstanding on
June 16, 1997, and provided that one Right would be issued with each share
of common stock thereafter issued. The Shareholder Rights Plan provides
that in the event a person or group acquires or seeks to acquire 15% or
more of the outstanding common stock of the Company, the Rights, subject to
certain limitations, will become exercisable. Each Right once exercisable
initially entitles the holder thereof (other than the acquiring person
whose rights are cancelled) to purchase from the Company one one-hundredth
of a share of Series A preferred stock at an initial exercise price of $55
per one one-hundredth of a share (subject to adjustment), or, upon the
occurrence of certain events, common stock of the Company or common stock
of an "acquiring company" having a market value equivalent to two times the
exercise price. Subject to certain conditions, the Rights are redeemable
by the Board of Directors for $.01 per Right and are exchangeable for
shares of common stock. The Rights have no voting power and expire on May
28, 2007.
NOTE 6 - ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). SFAS 128 replaces primary EPS with basic EPS, which excludes
dilution, and requires presentation of both basic and diluted EPS on the
face of the income statement. Diluted EPS is computed similarly to the
current fully diluted EPS. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, and requires restatement
of all prior-period EPS data presented. The adoption of this statement is
not expected to materially affect either future or prior-period EPS.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". These statements are both effective for periods
beginning after December 15, 1997. The adoption of these statements is not
expected to affect the Company's financial condition or results of
operations as they are disclosure only pronouncements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Results of Operations
Three Months Ended June 28, 1997 Compared to Three Months Ended June 29,
1996
Net sales for the second quarter of 1997 were $51.6 million, 16%
higher than the $44.5 million in the comparable period of 1996. Gehl
Construction's net sales increased 31% to $25.4 million in the second
quarter of 1997 from $19.4 million in the second quarter of 1996. The Gehl
Construction increase resulted from continued strong demand for the
Company's products, particularly rough-terrain telescopic forklifts and
skid loaders. Gehl Agriculture's net sales increased 4% to $26.2 million
in the second quarter of 1997 from $25.1 million in the second quarter of
1996. The increase was due primarily to an increase in shipments of forage
harvesting equipment, manure handling equipment and skid loaders.
Gross profit increased $2.2 million, or 16%, during the second
quarter of 1997 versus the comparable period of 1996, due primarily to
increased sales volume. Gross profit as a percent of net sales increased
to 30.1% for the second quarter of 1997 from 30.0% in the comparable period
of 1996. The shift in product mix of sales to Gehl Construction resulted
in the overall Company increase in gross profit as a percent of net sales.
Gross profit as a percent of net sales for Gehl Construction decreased to
32.2% in the second quarter of 1997 from 32.3% for the second quarter of
1996. Gross profit as a percent of net sales for Gehl Agriculture
decreased to 28.2% in the second quarter of 1997 from 28.3% for the second
quarter of 1996.
Selling, general and administrative expenses increased $343,000,
or 4%, during the second quarter of 1997 versus the comparable period of
1996. The Company's continued concentration on cost containment resulted
in selling, general and administrative expenses decreasing to 17.3% of net
sales during the second quarter of 1997 versus 19.4% in the comparable
period of 1996.
Income from operations in the second quarter of 1997 of $6.6
million was 39% higher than the $4.7 million in the second quarter of 1996.
Interest expense decreased $597,000, or 57%, to $459,000 in the
second quarter of 1997 from $1.1 million in the second quarter of 1996.
The decrease was a result of a reduction in average debt outstanding to
$23.8 million in the second quarter of 1997 versus $49.9 million in the
second quarter of 1996, combined with a decrease in the average rate of
interest paid by the Company to approximately 8.0% in the second quarter of
1997 from 8.3% in the comparable period of 1996. The decrease in the
average debt outstanding was primarily the result of cash flow generated
from reduced accounts receivable and inventory levels and increased
shareholders' equity over the past twelve months.
The Company's effective income tax rate was 36% for the second
quarter of 1997 versus 20.3% for the second quarter of 1996.
Six Months Ended June 28, 1997 Compared to Six Months Ended June 29, 1996
Net sales for the first six months of 1997 were $95.3 million,
$11.7 million, or 14%, higher than the $83.6 million in the comparable
period of 1996. Gehl Construction's net sales increased 27% to $46.2
million in the first six months of 1997 from $36.4 million in the first six
months of 1996. The Gehl Construction increase resulted from increased
demand for the Company's products, particularly rough-terrain telescopic
forklifts and skid loaders. Gehl Agriculture's net sales increased 4% to
$49.1 million in the first six months of 1997 from $47.2 in the first six
months of 1996. Of the Company's total net sales reported for the first
six months of 1997, $16.4 million represented sales made outside of the
United States.
Gross profit increased $4.2 million, or 17%, during the first six
months of 1997 versus the comparable period of 1996, primarily due to the
increased sales volume. Gross profit as a percent of net sales increased
to 29.9% for the first six months of 1997 from 29.1% in the comparable
period of 1996. The shift in product mix of sales to Gehl Construction
resulted in the overall Company increase in gross profit as a percent of
net sales. Gross profit as a percent of net sales for Gehl Construction
decreased to 31.5% in the first six months of 1997 from 32.0% in the first
six months of 1996. The primary reasons for the decrease were a shift in
mix of product shipments and a competitive pricing environment in which
price increases have not kept pace with cost increases. Gross profit as a
percent of net sales for Gehl Agriculture increased to 28.5% for the first
six months of 1997 from 26.9% for the first six months of 1996. The
primary reasons for the increase were: 1) reduced product costs due to
higher overhead absorption associated with increased levels of production,
2) export sales, typically made at a lower gross margin than domestic
sales, constituting a smaller portion of the shipments in 1997 than in
1996, and 3) the impact of a change in the mix of products shipped in 1997
versus products shipped in comparable 1996.
Selling, general and administrative expenses increased $1.1
million, or 7%, during the first six months of 1997 versus the comparable
period of 1996. The increase in spending is at a lower rate than the
increase in sales due to the Company's commitment to containing costs. As
a percent of net sales, selling, general and administrative expenses
decreased to 18.7% during the first six months of 1997 versus 19.9% in the
comparable period of 1996.
Income from operations in the first six months of 1997 of $10.7
million was 39% higher than the $7.7 million for the comparable period of
1996.
Interest expense decreased $1.2 million, or 56%, to $927,000 in
the first six months of 1997 from $2.1 million in the first six months of
1996. The decrease was a result of a reduction in average debt outstanding
to $23.0 million in the first six months of 1997 versus $49.8 million in
the comparable period of 1996, combined with a decrease in the average rate
of interest paid by the Company to approximately 8.0% in the first six
months of 1997 from 8.2% in the comparable period of 1996. The decrease in
the average debt outstanding was primarily the result of cash flow
generated from reduced accounts receivable levels and increased
shareholders' equity over the past twelve months.
Interest income decreased $147,000, or 18%, to $661,000 for the
first six months of 1997 from $808,000 in the comparable period of 1996 due
primarily to reduced interest income earned on floor plan wholesale
receivables and retail finance receivables.
The Company's effective income tax rate was 36.0% for the first
six months of 1997 versus 19.2% for the first six months of 1996.
Financial Condition
The Company's working capital was $62.3 million at June 28, 1997,
as compared to $57.6 million at December 31, 1996, and $77.3 million at
June 29, 1996. The increase since December 31, 1996 resulted primarily
from seasonal increases in accounts receivable. The decrease since June
29, 1996 was due primarily to a reduction in accounts receivable and
increases in accounts payable.
Capital expenditures for property, plant and equipment during the
first six months of 1997 were approximately $3.2 million. The Company
plans to make approximately $8.0 million of capital expenditures in 1997,
including $4.0 million to expand its two South Dakota manufacturing
facilities and add equipment necessary to increase production levels of
skid loaders, rough-terrain telescopic forklifts and paving products.
Outstanding commitments as of June 28, 1997 totaled approximately $2.1
million, including $1.5 million related to the aforementioned plant
expansion projects.
As of June 28, 1997, the weighted average interest rate paid by
the Company on outstanding borrowings under its line of credit facility was
7.0%. The Company had available unused borrowing capacity of $53.0
million, $45.4 million, and $36.6 million under the line of credit facility
at June 28, 1997, December 31, 1996, and June 29, 1996, respectively. At
June 28, 1997, December 31, 1996, and June 29, 1996, the borrowings
outstanding under the line of credit facility were $11.3 million, $10.5
million and $36.1 million, respectively.
The sale of finance contracts is an important component of the
Company's overall liquidity. Gehl has arrangements with several financial
institutions and financial service companies to sell, with recourse, its
finance contracts receivable. The Company continues to service all
contracts whether or not sold. At June 28, 1997, Gehl serviced $64.3
million of such contracts, of which $52.6 million were owned by other
parties. The Company believes that it has sufficient capacity to sell its
retail finance contracts for the foreseeable future.
Shareholders' equity at June 28, 1997 was $71.3 million. This
amount was $11.3 million higher than the $60.0 million of shareholders'
equity at June 29, 1996, due primarily to income earned from June 30, 1996
through June 28, 1997. During the second quarter, the Company reacquired
previously issued warrants to purchase 50,000 shares of it's common stock.
Warrants to purchase 130,000 shares of the Company's common stock remain
outstanding.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting of shareholders held on April 16,
1997, John W. Findley, John W. Gehl and Arthur W. Nesbitt were elected as
directors of the Company for terms expiring in 2000. The following table
sets forth certain information with respect to the election of directors at
the annual meeting:
Shares Withholding
Name of Nominee Shares Voted For Authority
John W. Findley 5,526,320 38,251
John W. Gehl 5,527,445 37,126
Arthur W. Nesbitt 5,527,270 37,301
The following table sets forth the other directors of the Company
whose terms of office continued after the 1997 annual meeting:
Year in Which
Name of Director Term Expires
Fred M. Butler 1998
William D. Gehl 1998
John W. Splude 1998
Thomas J. Boldt 1999
William P. Killian 1999
Roger E. Secrist 1999
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Articles of Amendment to the Restated Articles of
Incorporation of Gehl Company
3.2 Restated Articles of Incorporation, as amended, of Gehl
Company
4.1 Rights Agreement, dated as of May 28, 1997, between Gehl
Company and Firstar Trust Company. [Incorporated by
reference to Exhibit (4.1) to Gehl Company's Registration
Statement on Form 8-A, dated as of May 28, 1997 (Commission
File No. 0-18110)]
27 Financial Data Schedule [included in the EDGAR filing only]
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated May 28, 1997, reporting under
Item 5 "Other Events" the adoption of a Shareholder Rights Plan
was filed with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GEHL COMPANY
Date: August 7, 1997 By: /s/ William D. Gehl
William D. Gehl
Chairman of the Board, President
and Chief Executive Officer
Date: August 7, 1997 By: /s/ Kenneth P. Hahn
Kenneth P. Hahn
Vice President of Finance and
Treasurer (Principal Financial
and Accounting Officer)
GEHL COMPANY
FORM 10-Q
June 28, 1997
EXHIBIT INDEX
Exhibit
No. Document Description
3.1 Articles of Amendment to the Restated Articles of Incorporation of
Gehl Company
3.2 Restated Articles of Incorporation, as amended, of Gehl Company
4.1 Rights Agreement, dated as of May 28, 1997, between Gehl Company and
Firstar Trust Company. [Incorporated by reference to Exhibit (4.1) to
Gehl Company's Registration Statement on Form 8-A, dated as of May 28,
1997 (Commission File No. 0-18110)]
27 Financial Data Schedule [included in the EDGAR filing only]